Buying a house is probably one of the most important moments in a person’s life. It is the confirmation that we are adults and independent, the signing of a mortgage, real emancipation… but many times everything can turn around suddenly and you may need to sell that property. A job change, a separation, a financial problem… or simply not wanting it (which could also happen).
And that is exactly when many people doubt the timing of the sale. What is the best moment to sell?
No one forbids you from selling a newly purchased home. You can sell it tomorrow if you want, but commissions, penalties… everything can add up and end up becoming a serious headache.
But we’re here now, and we’re going to tell you what you should do if you want to sell your house and what is the best moment to do it.
What is the problem with selling houses?
That many times, although the normal thing is to stay a couple of years, some people need to sell sooner.
Unexpected moves, divorces or health problems push many homeowners to sell their houses long before they have enjoyed them. In those cases, selling early seems logical… although not always the most profitable.
Selling early is expensive
If you bought your house recently, selling it probably is not your best option. Commissions will come, closing costs, and up to 10% of the money you receive may disappear.
If you add to that moving costs, mortgage penalties and the fact that you have not yet built equity (the real value of your house), you will end up spending more than you have invested so far…
Imagine you bought for 300,000 dollars and sell after one year. No matter how nice the area is, between fees and taxes it is easy for any profit to disappear.
The famous two-year rule
In the U.S., there is an important detail: capital gains taxes. If you sell before having lived at least two years in the house, you must pay taxes on all the profit you get.
However, if you meet those two years, you can exclude up to 250,000 dollars in profit (or 500,000 if you file jointly). That tax protection disappears, which is why many people hold on to the property for at least those two years even if they do not want it.
The five-year rule
This rule is more informal, but economists say home values increase between 3% and 5% per year. In five years you will recover what you paid in commissions and will have amortized part of the mortgage.
Of course, every area is different, and nothing guarantees that your house will increase in price just by waiting.
Do you need to sell urgently?
If you have no choice but to sell early, here are some tips:
- Rent the home while you wait for a better moment
- Refinance if rates have gone down
- Improve the house to increase its selling value
How to know if NOW is a good moment?
It depends on you, your area and mortgage rates. If your neighborhood is going up in price, if rates drop (and more buyers enter the market), or if there is low supply… it may be a good idea to sell now.
But if prices are falling or there are too many homes for sale, waiting may be better. And if you have many doubts, you can consult a local agent to guide you through the sale.
So before rushing to sell because you need the money, think about what you are losing by not doing it with proper guidance. Talk to your bank, your tax advisor and a real estate agent so that…
You can sell your house whenever you want, no one stops you. But doing it too soon can turn what seemed like a good decision into a financial loss.